Corporate Finance - Ch 1 Vocab
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Created by:
breezylear on January 12, 2011
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18 terms
Terms | Definitions |
|---|---|
 Capital Budgeting | the process of planning and managing a firm's long-term investments |
| Capital Structure | the mixture of debt and equity maintained by a firm |
| Working Capital | a firm's short-term assets and liabilities |
| Sole Proprietorship | a business owned by a single individual |
| Partnership | a business formed by two or more individuals or entities |
| Corporation | a business created as a distinct legal entity composed of one or more individuals or entities |
| Agency relationship | relationship between stockholders and management |
| Agency problem | the possibility of conflict between the stockholders and management of a firm |
| Agency costs | the costs of the conflict of interest between stockholders and management |
| General partnership | all the partners share in the gains or losses and all have unlimited liabilitiy for all partnership debts, not just some particular share |
| Partnership agreement | the way the partnership gains (and losses) are divided - this can be an informal oral or a lengthy, formal written document |
| Limited partnership | one or more general partners will run the business and have unlimited liability, but there will be one or more limited partners who will not actively participate in the business |
| Unlimited liability | creditors can look beyond business assets to the proprietor's personal wealth, as in the case of a sole proprietorship |
| Corporate Finance | an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions; the primary goal is to maximize corporate value while managing the firm's financial risks |
| Executive compensation | how top executives of business corporations are paid |
| Stakeholder | someone other than a stockholder or creditor who potentially has a claim on cash flows of the firm |
| Primary market | the original sale of securities by governments and corporations |
| Secondary markets | those in which securities are bought and sold after the original sale |
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